Tata Capital CEO says IPO to boost Tier-I capital, targetting affordable housing and vehicle finance for growth

Tata Capital has achieved over 25% loan book growth and over 28% profit growth in recent years.

Leading NBFC Tata Capital’s Rs 15,500 crore IPO, the largest this year, has seen strong anchor investor interest, raising Rs 4,600 crore from marquee global and domestic funds, with LIC emerging as the largest investor.

In an exclusive interview with Moneycontrol, Managing Director and CEO Rajiv Sabharwal shared insights on the company’s roadmap, profitability, and post-IPO strategy.

Strengthening Capital and Balance Sheet

The IPO proceeds are aimed at boosting the Tier 1 capital from 12.8% to over 22%, while reducing the leverage of the NBFC’s books to below 5x. CEO Sabharwal said the fresh capital, combined with internal accruals, can support growth for the next 2-1/2 to 3 years, supporting the company’s organic expansion without pursuing acquisitions.

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Margins and Return Ratios

Current operating net interest margin (NIM) stands at 5.2% but Sabharwal said Tata Capital’s total income margin including fee-based income stands at around 6.1-6.2%. The company plans to improve profitability by increasing exposure to high-margin products such as affordable housing, micro home loans, equipment finance and leasing. The Return on Asset (RoA) is being addressed via cost-to-asset optimisation through technology and Gen AI adoption, lower cost of funds and disciplined credit management, all aimed at moving RoA towards industry-leading levels over the medium term.

Profitability Momentum

Tata Capital has achieved over 25% loan book growth and over 28% profit growth in recent years. While the Tata Motor Finance (TMFL) merger affected key ratios, the MD and CEO said the underlying performance of the NBFC reinforces confidence in sustaining profitability levers.

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Vehicle Finance Strategy

The TMFL merger has opened up a Rs 10 lakh crore commercial vehicle market lending opportunity, with annual disbursements of Rs 1.5 lakh crore, Sabharwal said. Tata Capital plans a multi-OEM vehicle finance business, applying its credit and digital expertise to TMFL’s portfolio. Over time, this integration is expected to enhance asset quality and return ratios to align with industry standards, the CEO added.

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Credit Costs and Cost of Funds

Rajiv Sabharwal said Tata Capital remains one of the lowest cost NBFC, maintaining credit costs below 1%, with the retail unsecured exposure controlled at around 12% of the book. The company’s AAA domestic and BBB global ratings has helped keep the funding costs low, with full benefits expected to flow through in H2FY26, said the CEO.

Sabharwal added that Tata Capital aims to build a resilient portfolio that performs well in both growth and downturn phases, leveraging strong anchor support, disciplined credit management and strategic growth initiatives.